The West Bromwich Building Society has reached an agreement with debt-holders to boost its financial strength and avoid insolvency by converting of its £182.5m debt into equity.
The move will strengthen its core tier 1 capital ratio, giving it a greater buffer to absorb losses and avoid the business failing.
The lender released a statement this morning announcing the deal.
"The capital exchange will materially strengthen the Society's core tier 1 capital ratio from 6.8% to 11.6% on a pro-forma basis."
West Brom said its core tier 1 capital ratio was now amongst the highest in the sector.
The lender added that a 'back-to-basics strategy' would reposition the Society and focus it on its strong regional position and its core competencies of retail savings and prime residential mortgages."
Robert Sharpe, chief executive of the Society, commented: "During a period of severe and unprecedented economic turmoil and the near collapse of the British banking system, the West Brom has carefully managed and refocused its business, driving through a programme of cost reduction to improve dramatically the efficiency of the Society, and has increased its core tier 1 capital base substantially.
"At the same time, we have concentrated on delivering what savers require most; a safe and secure home for their savings, with highly competitive rates that have frequently featured in best buy tables."
He added: "We are already seeing the benefits of the steps we have taken to return to our core activities. Despite the loss we have announced, we have a strong capital position, with a solvency ratio of circa 14% and, following the exchange of the Society‟s subordinated debt, a core tier 1 ratio of 11.6%, ratios which are amongst the strongest in the sector. This, combined with our strategic refocusing, means that we are well positioned for the future."IFAonline
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